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Old 08-04-2017, 04:33 AM
 
Location: On the road
5,937 posts, read 2,888,852 times
Reputation: 11356

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Yeah man the classic 4% makes no conditions/assumptions on preservation of principle, and many paths counted as "success" in the study end up with less than started.

Dying with a penny at end of retirement period = win.
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Old 08-04-2017, 04:37 AM
 
71,520 posts, read 71,712,424 times
Reputation: 49105
that is one of the reasons taking raises can be important if utilizing the 4% rule .

as kitces said " by applying the 4% rule, over 2/3rds of the time the retiree finishes with more than double their wealth at the beginning of retirement, on top of a lifetime of (4% rule) spending! Half the time, wealth is nearly tripled by the end retirement, as retirees fail to spend their upside! "

summary by kitces :


The fundamental purpose of the so-called “4% rule” is to determine an appropriate “income” or spending floor that is low enough to survive potential sequence-of-return risk – at least, based on the worst return sequences that can be found in the historical data. If market returns going forward turn out to be as bad as scenarios like the Great Depression or the stagflationary 1970s – from which the 4% rule originated – the portfolio is still anticipated to sustain inflation-adjusted spending to the end of the 30-year time horizon. If returns are better, there will simply be “extra” money left over.

Yet the reality is that in the overwhelming majority of scenarios, returns are not so bad as to necessitate a 4% initial withdrawal rate in the first place. In fact, by applying the 4% rule, over 2/3rds of the time the retiree finishes with more than double their wealth at the beginning of retirement, on top of a lifetime of (4% rule) spending! Half the time, wealth is nearly tripled by the end retirement, as retirees fail to spend their upside!

Accordingly, a more dominant approach is to plan in advance that if the portfolio gets “far enough” ahead, spending can be increased – but not increased so quickly that the retiree might have to go backwards shortly thereafter. Of course, the reality is that retirees experiencing a “favorable” sequence of returns will inevitably sit down for a portfolio/retirement review and realize they are so far ahead that it’s “safe” to increase spending anyway. But as it turns out, a relatively simple ratchet-style approach, where spending is increased by 10% any time the portfolio rises more than 50% above its starting value, can “dominate” the traditional 4% rule, generating equivalent or better retirement spending in all scenarios, even while being conservative enough to not require a spending cut in the event of a market pullback in the future.
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Old 08-04-2017, 04:50 AM
 
Location: San Diego
476 posts, read 510,012 times
Reputation: 879
I would want $5M plus a paid off home to feel comfortable. My grandma is 100 years old now and I've handled her finances for a while so see all the costs associated with getting older. And she owned apartment complexes and worked on/managed those until she was 85. She now has money in estate bonds generating between 3.5-5.5% and she gets social security about $1200 a month and a very small pension from 40 years ago. So she has a good monthly income but the care home is $4k per month and she's had more falls so more ER trips. More trips to specialists for hearing and vision (often not covered by Medicare). After seeing how much it costs her just in living and health care I'm quite stressed about having enough to retire.
We're going the route of buying rental properties to generate that monthly income and are on track to retire at 50 but I'm sure I will keep working.
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Old 08-04-2017, 05:19 AM
 
Location: Central IL
15,224 posts, read 8,523,201 times
Reputation: 35622
Quote:
Originally Posted by scgali View Post
I would want $5M plus a paid off home to feel comfortable. My grandma is 100 years old now and I've handled her finances for a while so see all the costs associated with getting older. And she owned apartment complexes and worked on/managed those until she was 85. She now has money in estate bonds generating between 3.5-5.5% and she gets social security about $1200 a month and a very small pension from 40 years ago. So she has a good monthly income but the care home is $4k per month and she's had more falls so more ER trips. More trips to specialists for hearing and vision (often not covered by Medicare). After seeing how much it costs her just in living and health care I'm quite stressed about having enough to retire.
We're going the route of buying rental properties to generate that monthly income and are on track to retire at 50 but I'm sure I will keep working.
FIVE million? Do I hear TEN, just in case? Seriously, I guess no one is really ever set to retire...how do people do it?
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Old 08-04-2017, 05:35 AM
 
Location: Central CT, sometimes NH.
3,473 posts, read 5,145,696 times
Reputation: 3531
Quote:
Originally Posted by johngolf View Post
And if you die before age 78, you lost your shirt of that deal.
Lol! You don't lose anything if your gone.
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Old 08-04-2017, 05:54 AM
 
Location: Philadelphia/South Jersey area
2,872 posts, read 1,402,350 times
Reputation: 10071
Quote:
Originally Posted by reneeh63 View Post
FIVE million? Do I hear TEN, just in case? Seriously, I guess no one is really ever set to retire...how do people do it?
lol, they live just like everyone else.

I think when the "million" dollar numbers maybe more of a scare tactic than any thing else. You know sort of like "hey get your hiney in gear and start savings".

Not only how do they retire, how do they live? for me that would mean never, ever taking a vacation, never ever going out to see a movie. It becomes an issue of do I want to live or barely exists?

I had a neighbor who has a 12 year old daughter, daughter saved and did extra chores to buy a new phone. My neighbor was bragging about how they wouldn't let her buy the phone but instead made her put it in an IRA. AT 12 LOL when I mentioned that I thought that was kinda lousy, she said "she'll thank me when she's older".

it's a hard call, I'm not going to have 5 million so no sense in me stress about it but I do appreciate some folks thoughts on why they think that's a good number
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Old 08-04-2017, 06:25 AM
 
71,520 posts, read 71,712,424 times
Reputation: 49105
people live on whatever they have . they make do with it. it may be a lifestyle they rather not have ,and it may be filled with stress over every unexpected bill. they may have little choices in life and have to always go with the cheapest even if it means not seeing family and friends because they had no choice but to live in cheapsville somewhere .

the more you have the more you can throw at problems as well as the more choices in life you can have. it isn't a scare tactic . it is just a warning that while we can live life in a trailer park for very little somewhere it may not be the choice you want . so examine the lifestyle you want and plan accordingly .

no one can say what anyone else needs or wants . we don't need much more than a tent in a warm climate but is that what we want .
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Old 08-04-2017, 06:34 AM
 
1,040 posts, read 484,865 times
Reputation: 1435
Quote:
Originally Posted by mathjak107 View Post

90% of the time over 30 years a 60/40 mix has left you with more than you started with and 67% of the time it has left you with more than 2x what you started with . so principal is anything but constant .
MJ--Do you have the numbers when the stock allocation is 90%+?
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Old 08-04-2017, 06:35 AM
 
71,520 posts, read 71,712,424 times
Reputation: 49105
you can run it very easily in firecalc . on longer retirements than 30 years it did better than it did over 30 year ones success wise .

50/50 fared the best up to 30 years .
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Old 08-04-2017, 07:02 AM
 
1,040 posts, read 484,865 times
Reputation: 1435
Quote:
Originally Posted by mathjak107 View Post
you can run it very easily in firecalc . on longer retirements than 30 years it did better than it did over 30 year ones success wise .

50/50 fared the best up to 30 years .
ahh ok..just did it.....technically my time frame is 19 years because that is when SS will kick in ( at age 70).......looks like I'm in good shape....thank you...
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